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Yomiuri Shimbun file phto Signs of mega banks are seen in Tokyo.
The Yomiuri Shimbun
16:08 JST, August 1, 2024
The Bank of Japan’s decision to raise its short-term interest rate target again this year will likely prompt many commercial banks to raise their short-term prime lending rates, which they use as the standard rate of interest applied to short-term loans of less than one year to companies.
This is expected to lead to hikes in variable housing loan rates, which are linked to short-term prime lending rates, possibly impacting the country’s economic climate to some extent.
When the BOJ decided to end its negative interest rate policy in March, commercial banks did not raise their short-term prime lending rates, as the margin of the hike was limited.
But following Wednesday’s BOJ decision, MUFG Bank announced on the same day that it will raise its short-term prime lending rate from Sept. 2. Other major commercial banks and regional banks are making moves to follow suit.
If the short-term prime lending rate is raised, it will impact the standard interest rates of the variable housing loan rates, which are used by about 70% of those with housing loans. Many banks set their standard interest rates by adding about 1 percentage point to the short-term prime lending rates.
After the BOJ ended its ultra-loose monetary policies in March, fixed rates for housing loans, which are linked to the long-term interest rate, have been clearly trending upward. If the variable housing loan rates also continue increasing, it is expected to impact the housing market.
In response to the BOJ’s decision on Wednesday, three mega banks, MUFG Bank, Sumitomo Mitsui Banking Corp. and Mizuho Bank announced on the day that they will raise interest rates on ordinary deposits from the current 0.02% to 0.1% between August and September.
Total household savings in Japan is greater than total household borrowing.
“[The BOJ’s interest hike] will have a positive impact on the household economy in net terms,” said a senior official of the central bank.
